NSW property investors winners as banks cut rates

Lenders are slashing investor home loan rates to record lows and offering cashbacks up to $4000 as buyer activity in NSW surges.

Property investors are set to be the winners of a new home loan battleground, as buyer activity in NSW surges.

An analysis by RateCity has revealed 22 lenders have slashed their rates on investor home loans over the past two months. Fourteen have cut their one-year fixed term rates, while 19 have lowered them on their two-year fixed mortgages.

The lowest advertised variable rate is with Northern Inland Credit Union at 1.89 per cent, while BCU offers 1.87 and 1.98 per cent on their one- and two-year fixed rate mortgages respectively.

All of these are record lows, according to the comparison website.

Property investors are set to be the winners of a new home loan battleground, as buyer activity in NSW surges. Picture: Gaye Gerard

It comes as the most recent figures from the Australian Bureau of Statistics (ABS) show the value of new investor home loans (excluding refinancing) in NSW in April was $3.28 billion — up 58 per cent year-on-year.

Nationally, that figure was $8.05 billion, the highest it has been since June 2017, showing that investor activity is returning as the Covid pandemic eases.

“After a sharp retreat from the market at the beginning of Covid, investors are flocking back onto the property scene,” RateCity research director Sally Tindall said.

“The hiatus in investor lending was brief at best. While investors were quick to pull up stumps at the first sign of trouble last year, record low rates and forecasts of price increases of up to 19 per cent in some hot spots in 2021 has drawn them back into the property game.”

Ms Tindall said the analysis showed nine investor home loans were now under two per cent, compared to none a year ago.

The lowest variable rate for investors had fallen from 2.79 per cent to 1.89 per cent over 12 months, while lowest two-year fixed rate had dropped from 2.34 per cent to 1.98 per cent.

“Month after month, the value of new investor loans coming into the market is increasing by the tens of millions, and banks all want a slice of the action,” she said.

RateCity spokeswoman Sally Tindall said investors should be cautious of cashback deals. Picture: Supplied.

In a bid to sweeten the deal even more, some lenders are offering cashbacks of up to $3000 for new loans, and as much as $4000 to those looking to refinance.

But Ms Tindall warned the money wasn’t always worth it.

“Sit down and work out how whether you’re likely to come out ahead on a cashback deal or if you’re better off going with a low rate loan,” she said.

“When you do the maths, factor in the interest rate, fees, cashback and how frequently you will refinance.”

Property data firm CoreLogic’s head of residential research Australia, Eliza Owen, said investors accounted for a “relatively small” portion of housing finance at 25.9 per cent, about 10 points below the decade average.

However, Ms Owen said the value of investor loans had grown more quickly than that of owner occupiers over the past six months, up almost 57 per cent compared with a 33.5 per cent lift in the latter.

She said ramped-up investment activity was likely to have pushed house prices up, which in turn made it more difficult for first-home buyers to crack the marked.

The ABS data showed that, nationally, lending to first timers totalled $6.69 billion in April, down $132 million on the previous month which was the third consecutive drop.

“The increased finance for the investor cohort has offset a decline in first-home buyer activity, so … the increase in investor activity has contributed to the level of housing demand which has likely contributed to an increase in prices,” Ms Owen said.

She said that currently there did “not appear to be any major headwinds to continued housing market growth”.

“Though we do expect affordability constraints are starting to take some momentum out of the market,” she said.

Originally published as NSW property investors winners as banks cut rates